California Might Fine Wal-Mart $6,000 for Each Underpaid Employee

It’s no secret that many large companies make profits in part by keeping their labor costs down — a move that puts a burden on taxpayers, who are then forced to make up the deficit by paying for Medicare, food stamps, and other assistance programs, as Rick Unger on Forbes.com points out. In fact, a recent report by the Democratic staff of the U.S. House Committee on Education and the Workforce found that Wal-Mart’s low wages could be costing taxpayers $5,815 per employee — and as a result, the State of California is considering legislation that would fine the retailer $6,000 for every underpaid employee.

How do they define “underpaid”? Well, in this case, the legislation is looking at full-time employees who wind up Medi-Cal, which is California’s version of Medicaid. Cashiers at Wal-Mart typically make between $7.41 – $10.51 an hour, making their yearly salary, even at full-time, as low as $15,412.80, or just about poverty line for a family of two. Wal-Mart isn’t alone, either: our data showed that the company paid about 3 percent below market, which means that many of their competitors are paying similarly low wages, and potentially taxing the system, as well.

The report’s authors note:

“The most recent decade proved to be a ‘lost decade’ for most working families — the average family’s income is lower today than at any point in the last ten years. Income inequality is more extreme today than at any point since before the Great Depression, with the top 1 percent of income earners receiving 93 percent of income gains in the recovery. In the third quarter of 2012, corporate profits reached $1.75 trillion, their greatest share of GDP in history. During that same quarter, workers’ wages fell to their lowest share of GDP on record.”

The U.S. Committee of Education and the Workforce feel that labor policy can address some of these inequities, for example, by raising the minimum wage and strengthening equal pay laws. Whether or not Congress will enact labor law reform remains to be seen, but in the meantime, at least, one state seems to be taking their recommendations seriously.

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Jen Hubley Luckwaldt

Jen Hubley Luckwaldt writes about work-life balance, stress management, and other topics relating to what makes us happy at work. A full-time freelancer, she deals with stress by blurring the lines between life and work to the point where the two spheres are barely separate. The happiest day of her career was when scientists proved that looking at pictures of cute animals makes us more productive.